A 32 Year Record in Cattle Kills Driving Markets?

While the world has been busy paying attention to the Fed minute meetings, the Pope’s visit to the U.S., and Donald Trump’s latest gaffe, the Live Cattle market experienced a limit down day (what’s a limit move?) in the markets yesterday. With a closer look, we can see the October contract is down 12% since the beginning of August (and 5% of that coming in the last 4 trading days). {Disclaimer: Past performance is not necessarily indicative of future results}.

October Cattle Market Moves(Disclaimer: Past performance is not necessarily indicative of future results)
Chart Courtesy: Barchart

For answers to this move, we turned to RCM’s newest addition, Thomas Chavez, who has experience in these markets.

“The long and short of the sharp down move in live cattle….an unexpected surge in production. The trade was bullish, and assumed a continuing tight supply situation in the 4th quarter, but it was the opposite.

The past week’s steer and heifer slaughter, at 469,000 head, was the largest weekly kill thus far in 2015.  The last time the slaughter reached year-to-date high levels in the month of September was more than 30 years ago (1983).  Seasonally, slaughter levels peak in the June – August time frame, so having such a supply surge in the fall is unusual.

According to the USDA, overall feedlot inventories as of September 1 were up 3% from a year ago, but they were up 7% in Iowa, and the Iowa number might be underestimated.”

Chavez goes onto say that the smaller herders might actually be the ones that are contributing the most to this influx in kills.

“The bigger surprise that most didn’t see coming, was a developing backlog of finished cattle, and underestimating the influence that smaller (under 1000 head), corn-belt cattle feeders, would have on the overall market.”

The unique twist to this story, however, isn’t just that there are more cattle kills but that these cattle are overweight while demand is feared to continue to go down. The Wall Street Journal reports that the weights for the cattle are at near record levels.

“The U.S. Department of Agriculture has reported beef prices down nearly $16 per hundred pounds in the past five days, though costs for retailers are still nearly three times as much as pork at the wholesale level.

At the same time, weights of cattle being marketed to beef packers remain near-record heavy levels, adding to the volume of beef available to grocery stores and restaurants.”

On the demand side, we’re seeing lower prices for all cuts of beef across the country.

Cuts of MeatSource: Beef Retail

Those tables around the different cuts of meat are the prices dating back the previous week and year. If the numbers are red it means those current prices for those cuts of meat are lower than they were the year prior.

Next time you visit your favorite high-end steak house, you may want to ask the proprietor for a discount on that $60 N.Y Strip!

(P.S – If you’re wondering about the difference between the live cattle and the feeder cattle market, we talked about that here).

 

Write a Comment

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

logo